Home / Insurtech / COVID squeeze to encourage data-for-premium trade offs
3 May 2021
As business and household budgets are squeezed by the COVID pandemic, customers are more likely to trade their personal data for cheaper premiums and this will increase the importance of big data and analytics in insurance, GlobalData says.
Investment in data analytics is set to pick up pace after a temporary decline last year, GlobalData’s Big Data in Insurance report says.
GlobalData analyst Ben Carey-Evans says activity trackers reward consumers for exercise while telematics is “relatively mainstream” and rewards good driving behaviour. While big data is present in every line of insurance, these two lines have been most adept at using data to track and improve consumer behaviour.
“Big data is already heavily used in health and motor insurance, with consumers more accustomed to the trade-off between access to personal data for cheaper premiums in these lines,” he says.
The value and volume of investment deals in insurance analytics hit record highs in 2019, with deal value reaching $US960.1 million ($1.24 billion) in the fourth quarter and 33 deals completed in the first quarter of 2020 before the COVID pandemic restricted activity.
A high number of deals completed in the last three months of 2020 indicated that interest and developments in the analytics theme was set to pick up, GlobalData says.
“Big data is already a key theme within the insurance industry,” it says. “Insurers hold vast amounts of data on consumers, businesses, and claims. The key has been to utilise what they have collected into actionable and valuable insights. Those that have been able to do that best have had the most success in reducing claims and saving themselves and customers money,” the report says.
The potential for growth in this theme is “endless” as the world constantly becomes more connected, and more Internet of Things devices are collecting data in real-time, it says.
GlobalData says insurtechs have a role to play via partnerships.
“With a few exceptions it is largely technology companies partnering with insurers and improving their data collection, management, and analysis capabilities, as opposed to creating their own data-driven policies to compete with incumbent players,” it says.
The report also says climate change will be big data’s “most important long-term use” as this is the biggest issue facing the insurance industry in the long term and the best way to monitor and reduce that is with insights from data built up from previous events.